Contract rates not obeying inflation

[Lance]

You won't change my mind with a single photo.

Here are my credentials.

Do you think I'd fake a photo to change your mind?

[eek]

The original question is why do contract rates not move with inflation and I have not heard a satisfactory answer other than you need to increase productivity to ask for more cash

This is partly why I keep on asking about rates and perm salaries - In part because contract rates dont seem to have moved (and I might be out of date here) whilst taxation (IR35) has increased. All of this against a backdrop where employment is at record high and there is a shortage - So if rates dont go up in this environment when will they go up ?

Taxation isn't a client issue - it's a personal issue. A client defines a budget for a project, gets it sanity checked by others (internal people, external people as to whether it's at all achievable) and then goes to market to find a suitable contractor / consultancy.

Reality is that if decent people are willing to work for £600 inside that's likely to be the going rate.

[dsc]

I have not heard a satisfactory answer other than you need to increase productivity to ask for more cash

Maybe you need to rethink what satisfactory is then as most said that inflation and rates have not a lot to do with each other unless you have proper business costs like office rentals etc. Besides two digit inflation hardly ever (never?) has a corresponding increase in salaries / rates etc.

[dsc]

Below is a green belt site in Denholme, West Yorkshire. It has had planning refused as it's green belt.
The green belt doesn't work. Huge swathes of the UK are green belt. With around 1% of thet green belt we could build the houses that are needed.

What's not to love?

Pretty much all reasonably priced (ie. with houses that don't start at £1m) developments I've seen in Surrey are next to a main busy road and / or rail line. What's that? you say you'd like to live slightly further away from a busy road, all that CO2, heavy metals and / or rail line? sure, that will be £1.5m for 100sqm. Also the amount of mansions hidden around in the woods all over the county is absolutely on another level. I guess Surrey and reasonably priced simply hasn't got anything in common...plebs can go and live elsewhere.

[malvolio]

What we see in this thread is a lack of knowledge of basic economics in your specific market.

Many factors affect rates, such as supply/demand, cost rises (or reductions) and so on. However, in our case, rates are not entirely under our control. Between us and the client is an agency who are in a race to the bottom. They make their money on the differential between what they charge and what percentage we get. They have to balance their rate against the opposition - in other words sell themselves as the most cost efficient supplier of their resources (and don't tell the client that they don't actually have any resources until they have sold them to you...). That overrides basic market forces, since clients are used to paying out £nnn for a standard coder - snoe that os roughly what all the various agencies tell them is the cost - and budget accordingly. A short term rise in their costs has zero impact on their budgetary plans so there is no incentive to raise their rates in line with our costs.

The answer is clear. Get yourself in a position as a recognised expert in something and get your own work. Then you can set a sensible rate for the job. Good luck with that one, since if you can do such a thing you would already be doing it...

[Lance]

What's not to love?

Pretty much all reasonably priced (ie. with houses that don't start at £1m) developments I've seen in Surrey are next to a main busy road and / or rail line. What's that? you say you'd like to live slightly further away from a busy road, all that CO2, heavy metals and / or rail line? sure, that will be £1.5m for 100sqm. Also the amount of mansions hidden around in the woods all over the county is absolutely on another level. I guess Surrey and reasonably priced simply hasn't got anything in common...plebs can go and live elsewhere.

Everyone says they want more houses.
Nobody wants houses near them.

Scrap the green belt (that doesn't mean build everywhere. Just accept the green belt is not for for purpose)
Reform planning (also not fit for purpose as it stands currently)
Build more houses (where the market determines they should be).

If you don't want new houses near you, then buy the blasted land. That's the only way to ensure it won't be built on (and even then it's not guaranteed).

[KentDogWalker]

The original question is why do contract rates not move with inflation and I have not heard a satisfactory answer other than you need to increase productivity to ask for more cash

This is partly why I keep on asking about rates and perm salaries - In part because contract rates dont seem to have moved (and I might be out of date here) whilst taxation (IR35) has increased. All of this against a backdrop where employment is at record high and there is a shortage - So if rates dont go up in this environment when will they go up ?

great points

[WTFH]

Rates go up when your ability to market yourself for your unique set of skills means people will pay more for you.
When you have a country whose government (& their followers) practice is “race to the bottom”, rates will not go up unless you’ve got a reason for them to do so for you.

[northernladuk]

The original question is why do contract rates not move with inflation and I have not heard a satisfactory answer other than you need to increase productivity to ask for more cash

This is partly why I keep on asking about rates and perm salaries - In part because contract rates dont seem to have moved (and I might be out of date here) whilst taxation (IR35) has increased. All of this against a backdrop where employment is at record high and there is a shortage - So if rates dont go up in this environment when will they go up ?

Never. Contracting is so diluted now not to mention the offshore offerings. Back in the day it was specialists on rates of 4 figures supplying services the clients just didn't have. Now it's just a defacto standard way to get a piece of work done without having to get lumbered with a permie. Droves and droves of people are turning to contracting and clients are ending up with more contractors than perms in the office.

Contracting as a specialist delivering high value work to a client are over. It's just a sausage factory now. Nothing specialist or clever anymore, just another average perm that left their job to go contracting.

On something more tangible, last I saw when projects were costing heads a perm was costed at roughly twice what they get paid as they cost the company in overheads, benefits, office and all that i.e. the total cost of emplyment. So they just farm the same role out at the same rate to the contractor. When people say we are an expensive resource we aren't really, we cost about the same as employing someone. People just make the mistake of thinking the wage is the only cost to conisder.

So same cost to the project, difference is we just pocket the lot. So in a good majority of cases our prices are driven by rate cards that are linked to the cost of perm so very little to do with market conditions, skills or anything. As salary is only part of the cost of a perm the rate card doesn't change much hence nor do rates. That's my ill educated opinion on part of the reason rates going up. The other above is a glut of tulip contractors and hey presto, no change and no chance of their ever being.

[TheDude]

The price of an eighth has been constant for years.